Chevron (CLC) and Exxon Mobil (XOM) turned lower along with other energy stocks on Wednesday as concern over SVB’s financial crash spilled over into the oil market. U.S. oil prices fell to their lowest level since late 2021. CVX shares led Wednesday’s first losses among Dow Jones Industrial stocks.
X
U.S. oil futures remained below $70 a barrel on Wednesday, falling to prices not seen since December 2021. West Texas Intermediate (WTI) prices fell to $67.50 a barrel, marking a down 13% since the end of 2022. Meanwhile, Brent futures were trading around $76 a barrel, near December 2022 levels.
The drop in oil prices comes as the bankruptcy of SVB Financial late last week and the Signature Bank of New York on Sunday raised concerns that other financial institutions could collapse. However, recent oil demand forecasts from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) may offer some relief to prices.
Russia’s invasion of Ukraine in February 2022 sent oil prices soaring. Futures fell in the latter part of the year, trading Wednesday 43% below the peak reached in June.
Chevron stock fell 3.4% on Wednesday in market trades. Exxon Mobil dropped 4%. Sellers also tore up oil service companies, sending Halliburton (HAL), SLB (SLB) and hugue baker (BKR) to losses of around 6% to 9%.
OPEC and oil forecasts
On Tuesday, OPEC maintained its forecast for global oil demand growth in 2023. The oil cartel tempered optimism around the reopening of the Chinese economy with worries about the United States and Europe. .
In its monthly market report, OPEC forecasts that oil demand will increase by 2.3 million barrels per day in 2023 to reach 101.9 million barrels per day. Global oil demand totaled 99.8 million barrels in 2022. OPEC also raised its forecast for oil demand growth in China for 2023.
On the supply side, Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC+ would stick to the production cuts agreed in October until the end of 2023.
Meanwhile, the International Energy Agency echoed a bullish outlook for oil demand, pointing to a massive increase in China’s post-pandemic air travel recovery and economic reopening.
Chevron Stock, Other Stocks React to Oil Prices
Airline and shipping company stocks often rise when oil prices fall, as declines allow companies to lock in cheaper fuel price hedges. However, on Wednesday, shipping and airline stocks fell overall. Airlines had fallen after a number of carriers gave mixed updates on Tuesday.
Meanwhile, energy stocks showed some resilience ahead of market Wednesday, with Chevron, Exxon Mobil and others holding losses at around 2%. At the opening, sales picked up and the losses worsened.
Chevron stock is now down nearly 3% for March and heading for a fourth consecutive monthly decline. Exxon posted a 6% loss, heading for its second monthly decline.
Diamondback Energy (FANG) and western (OXY) fell between 5% and 7%. Devon Energy (DVN) lost 6.4%.
Conoco Phillips (COP) fell 4.9% on Wednesday. On Monday, the Biden administration approved the Willow oil drilling project in Arctic Alaska.
This gives ConocoPhillips the green light to begin construction on its approximately $7 billion project in Alaska’s National Petroleum Reserve. COP expects the project to produce about 180,000 barrels of oil per day at its peak, which is equivalent to about 40% of Alaska’s current crude production.
Environmental organizations criticized Biden for the move, saying he was backtracking on his climate protection pledges.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
YOU MIGHT ALSO LIKE:
Top Funds Acquire No. 1 Industry Leader Close to Breakthrough with 364% Growth
Gain an edge in the stock market with IBD Digital
Stock Tesla in 2023: the electric vehicle giant faces different challenges in its two megamarkets
SVB Financial collapsed 15 years after Bear Stearns. How has the federal response changed?
Futures fall as European banks tumble on Credit Suisse